Ritz 'Suduruk'... Is This Really an IPO Fund?

IPO Slump Leads to Consecutive Listing Withdrawals
1 Trillion Won Exits from This Year's IPO Funds
Focus on REITs Investment for Profit Management

View of the National Assembly and the financial district from IFC Mall. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Minji Lee] IPO funds are transforming into REITs funds. As the IPO market deteriorates amid a volatile stock market, investors are fleeing, prompting fund managers to include ‘REITs’ to manage returns.

According to financial information provider FnGuide on the 31st, the top 10 holdings of the ‘Alpha Bond Step-up IPO’ fund established in January this year were LG Energy Solution (54%), D&D Platform REITs (28.75%), JR Global REITs (12%), NH All One REITs (1.48%), Mirae Asset Global REITs (1.18%), and BCN C (0.36%). Except for LG Energy Solution and BCN C, most of the holdings were REITs that went public last year.

The ‘Coreate REITs Plus IPO’ fund launched in February this year included ESR Kendall Square REITs (20.04%), Lotte REITs (18.49%), iREIT KOREA CREP (8.47%), NH All One REITs (8.46%), Shinhan West T&D REITs (8.12%), Shinhan Alpha REITs (8.04%), and Koramco Energy REITs (6.66%). This fund aims to invest in IPO companies to seek returns above market performance and gain dividend yields through REIT investments. However, after the listing of LG Energy Solution on January 27, the IPOs of major companies stalled, and the fund’s main holdings became entirely REITs. Even considering the lock-up volumes of REITs, the situation of other major IPO funds was not much different.

The current IPO market is not favorable. Following the high-profile IPOs of Hyundai Engineering and SK Store, large-scale IPOs such as Daemyung Energy, One Store, and Taelim Paper have withdrawn their listings due to poor demand forecasts. The stock prices of companies that went public earlier have also been sluggish, causing the IPO market to freeze. In the second half of last year, IPO funds rushed into ‘soft closing’ (subscription restrictions due to excessive capital inflows) amid expectations for major IPOs such as Kakao Bank, Krafton, and Kakao Pay, but this year the situation is different. Among domestic IPO funds with assets over 1 billion KRW (145 funds), approximately 980 billion KRW has been withdrawn since the beginning of the year.

As a result, fund managers appear to have reluctantly included REITs to endure this difficult period. Despite a declining market where even large-cap stocks have fallen amid unstable external conditions, REITs have maintained solid returns. One IPO fund manager said, “Since LG Energy Solution, there have been virtually no stocks to include,” adding, “As the unstable stock market environment continues, there seems to be a growing tendency to secure more allocations of IPO REITs.”